Supreme Court of India
M.R. SATWAJI RAO (D) BY L.RS.versusB. SHAMA RAO (DEAD) BY L.RS. & ORS.
- Citation
- 2008 INSC 472
- Decided
- 9 April 2008
- Disposal
- Dismissed
- Bench
- ARIJIT PASAYAT
Holding
The mortgagee’s purchase was barred by Order XXXIV Rule 14 CPC, the purchase is held in trust for the mortgagor under Section 90 of the Trusts Act, and the mortgagor’s right of redemption subsists.
Summary
The appellant mortgagee had taken a usufructuary mortgage on a property in 1948, allowing the mortgagor to remain in possession as a tenant. When the mortgagor defaulted on rent, the mortgagee obtained a money decree for arrears of rent and, in execution, purchased the property at a public auction without instituting a suit for sale under Order XXXIV Rule 14 of the CPC. After about thirty years the mortgagor filed a suit for redemption, which the trial court dismissed but the High Court reversed, granting a preliminary decree of redemption. The Supreme Court held that the mortgagee’s purchase was barred by Order XXXIV Rule 14, that the purchase amounted to a trust under Section 90 of the Indian Trusts Act, and that the mortgagor’s right of redemption continued and was not extinguished. The Court also affirmed that the suit for redemption was filed within the 30‑year limitation period under Article 61 of the Limitation Act. Consequently, the appeal was dismissed.
Issues considered
- The mortgagee’s right to sell the mortgaged property in execution of a money decree without a suit for sale under Order XXXIV Rule 14 CPC.
- Whether the mortgagee’s purchase of the property creates a trust under Section 90 of the Indian Trusts Act, preserving the mortgagor’s right of redemption.
- Whether the right of redemption under a usufructuary mortgage is extinguished by the mortgagee’s purchase.
- The applicability of the 30‑year limitation period under Article 61 of the Limitation Act to the suit for redemption.
Legislation cited
- Code of Civil Procedure, 1908s. Order XXXIV Rule 14
- Indian Trusts Act, 1882s. 90
- Limitation Act, 1963s. Article 61
- Transfer of Property Act, 1882s. 58(d), s. 60
Subjects
usufructuary mortgageright of redemptiontrust under Section 90Order XXXIV Rule 14 CPClimitation periodmortgageemortgagorsale of mortgaged property
Judgment
[2008] 6 S.C.R. 90
A M.R. SATWAJI RAO (D) BY L.RS.
V.
B. SHAMA RAO (DEAD) BY L.RS. & ORS.
(Civil Appeal No. 319 of 2002)
APRIL 9, 2008.
B
[DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.]
Transfer of Property Act, 1882 - s. 58 (d) - Usufructuary
mortgage -Mortgager remaining in possession of the
c mortgaged land as a tenant on payment of rent - Failure to
pay rent - Suit for recovery of money by mortgagee, decreed -
In execution of the decree, mortgaged land auctioned and
purchased by the mortgagee - Suit by mortgager for
redemption of mortgage - Dismissed by trial court - Decreed
D by High Court - On appeal, held: Mortgagor entitled to redeem
the mortgage - The suit by mortgagee since was not in terms
\.
of 0. XXXIV r. 14 CPC, purchase by him amounts to a mere
trust for the mortgagor c Suit for redemption also barred by
limitation - Trusts Act, 1882 - s. 90 - Code of Civil Procedure,
1908 - 0. XXXIV r. 14 - Limitation Act, 1963 -Article 61.
E
Predecessor of respondents-plaintiff executed a
usufructory mortgage in favour of the appellants-
defendant No. 2 on 19-2-1948. Though possession of the
land mortgaged was to be given to the mortgagee, but
F the mortgagors remained in possession thereof as tenants
~
of the mortgagee on a monthly rent. As the mortgagors
failed to pay the rent, the mortgagees filed a suit for
recovery of money. The suit was decreed. In execution of
the decree, the mortgaged property was auctioned and
G the same was purchased by the mortgagees. Mortgagors,
after around three decades, filed suit for redemption of
the mortgage. Trial court dismissed the suit. High Court, ...
in appeal, decreed the suit. Hence the present appeal.
H 90
·'
M.R. SATWAJI RAO (D) BY L.RS. v B. SHAMA RAO 91
(DEAD) BY L.RS. & ORS.
Dismissing the appeal, the Court A
HELD: 1. Rule 14 of Order XXXIV CPC prohibits the
mortgagee to bring the mortgaged property to sell
otherwise than by instituting a suit for sale in enforcement
of the mortgage. Admittedly, the said suit by the
mortgagee was not in terms of Rule 14 of Order XXXIV. B
Therefore, bringing the mortgaged property for sale by
the appellants in execution of the decree passed in the
money suit and purchasing the same by the appellants in
public auction is clearly barred under Order XXXIV Rule
14 CPC. [Para 6] [99-D, E] .C
2. The decree in favour of the appellant mortgagee
was not an independent money decree· against
respondents but merely for satisfaction of the rents
accrued on the mortgaged property,. leased back to the
0
respondents -mortgagors on 19.02.1948 itself up to
;. ·12.12.1948 and thereafter which was secured by a second
mortgage deed dated 12.12.1948 executed by the
respondents in favour of the appellants towards arrears
of rent for the period from 19.2.1948 to 12.1-2.1948. In these
circumstances, it is evident that the suit filed by the E
·mortgagees was very much for seeking satisfaction of
claims arising under the suit property and the same was
·not on a suit for sale instituted in enforcement of the ·
mortgage in question. [Para 6] [99-B, C, D, G, H, 100-A] .
F
3. Illustration (c) of Section 90 of Trusts Act is
applicable to the case on hand .. The purchase by the
mortgagee in the circumstances of the case amounts to
a mere trust and either himself or his legal representatives
cannot be allowed to exploit the adversity of the
appellants. [Para 7] [100-C] · ·G
-*· Sachidanand Prasad vs. Babu Shea Prasad Singh 1966
(1) SCR 158 - distinguished.
Mritunjoy Pani and Aw. vs. Narmanda Bala Sasmal and H
92 SUPREME COURT REPORTS [2008] 6 S.C.R.
A Anr. 1962 (1) SCR 290; Jayasingh Dnyanu Mhoprekar and
Anr. vs. Krishna Babaji Patil and Anr. 1985 (4) SCC 162;
Namdev Shripati Nale vs. Bapu Ganapati Jagtap and Anr.
1997 (5) sec 185 - relied on.
4. Though the mortgagee purchased the mortgaged
B property pursuant to the decree in the money suit, in the
absence of recourse to Rule 14 of Order XXXIV, the
relationship of mortgagor and mortgagee continues to
subsist even thereafter, and his purchase is only in trust
for the mortgagor. In view of the same, the right to redeem
c the mortgage is not extinguished and in the eye of law
the purchase of the mortgaged property in pursuance of
the decree for rent arrears must be deemed to have been
made in trust for the mortgagor. In such circumstances,
the High Court was right in granting preliminary decree
D for redemption. [Para 13] [105-C, D, E]
5. Under Article 61 of the Limitation Act, 1963, for a
mortgagor to redeem or recover possession of
immoveable property mortgaged, the period of limitation
provided is-. 30 years when the right to redeem or to recover
E possession accrues. The suit for redemption of
mortgaged property was filed within the time prescribed,
the High Court cannot be faulted for granting preliminary
decree for redemption. [Para 13] [105-E, F, G]
F CIVIL APPELLATE JURISDICTION : Civil Appeal No.
319 of 2002.
From the Judgment dated 11.12.1998 of the High Court
of Karnataka at Bangalore in R.F.A. No. 465/1990
S.B. Sanyal, Rajesh Ma hale for the Appellant.
G
P. Vishwanath Shetty, R.P. Wadhwani, B. Subrahmanya
Prasad, K.B. Sandeep and A.S. Bhasme for the Respondents.
The Judgment of the Court was delivered by
-·
H P. SATHASIVAM, J. 1) This appeal is directed against
M.R. SATWAJI RAO (D) BY l.RS. v. B. SHAMA RAO 93
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J.]
+
the final judgment dated 11.12.1998 of the High Court of A
Karnataka at Bangalore in R.F. A. No. 465 of 1990 by which the
High Court allowed the first appeal filed by the respondents
herein.
2) The facts, in a nutshell, are as under:
8
~ The legal representatives of defendant No.2 are the
appellants in this appeal. On 19.2.1948, the plaintiffs'
predecessor executed a usufructory mortgage in favour of the
appellants herein for a sum of Rs.10,000/-. The terms of the
said mortgage deed were that the mortgagee shall remain in c
possession of the mortgaged property without paying rent and
that the mortgage amount of Rs.10,000/- shall carry no interest.
The period of redemption was five years from the date of
mortgage. However, the mortgagers continued in possession
of the mortgaged property as tenants of the mortgagee on a
D
monthly rent of Rs.97.50. As the mortgagors failed to pay the
-1· rent, on 19.5.1952, the mortgagee filed suit being O.S. No. 120/
51-52 on the file of the 1st Munsif, Bangalore for arrears of rent.
The said suit was decreed. In pursuance of the said decree, the
mortgagee (2nd defendant) filed Execution Petition No. 1002/
51-52 and the property was put on auction sale by the executing E
Court. Mortgagee being the highest bidder purchased the
schedule property in court auction. Sale was confirmed. The
respondents/mortgagors neither objected for the sale nor
confirmed the sale or taken any steps to set aside the sale over
three decades. On 18.2.1983, the plaintiffs/respondents, after F
nearly three decades, filed a suit being O.S. No. 632 of 1983
on the file of the Ill Addi. City Civil Judge, Bangalore for a decree
of redemption of the mortgage of the suit schedule property sold
in public auction as long back as on 11.9.1952. The Civil Judge,
after considering both oral and documentary evidence, G
dismissed the suit with costs on 31.7.1990. Aggrieved by the
,.._ said order, the plaintiffs filed R.F.A. No. 465 of 1990 before the
High Court. The High Court allowed the appeal decreeing the
suit for redemption. Against the impugned judgment of the High
Court, the defendants filed the present appeal by way of spec12i H
94 SUPREME COURT REPORTS [2008] 6 S.C.R
A leave.
3) Heard Mr. S.B. Sanyal, learned senior counsel
appearing for the appellants, Mr. P. Vishwanath Shetty, learned
senior counsel for the contesting respondent Nos. 1(i) to (vii)
and 7 and Mr. R.P. Wadhwani, learned counsel appearing for
B respondent Nos. 2,3,5,6,8 & 9.
4) Mr. Sanyal, learned senior counsel for the appellants
mainly contended that the money decree (O.S.No 120/51-52)
obtained is an independent one and not connected with the
C mortgage claim and in execution of the money decree the
property was sold on 11.09.1952, the relationship of mortgagor
and mortgagee is not subsisting, in such circumstances, Order
XXXIV Rule 14 CPC is not applicable and the trial Court rightly
dismissed the suit, however, the High Court committed an error
in granting preliminary decree for redemption as if the original
D mortgage subsists. According to him, the application of Order
XXXIV Rule 14 CPC is wholly illegal and setting aside the sale \
of 1951-52 is inequitable especially in view of the fact that there
was no objection from the respondents for sale or confirmation
of the sale and of the fact that they have not taken any steps to
E set aside the sale for over three decades. On the other hand,
Mr. Vishwanath Shetty, learned senior counsel for the contesting
respondents submitted that O.S. No 120/51-52 brought by the
appellants was very much for seeking satisfaction of the claims
patently arising under the mortgage of the suit schedule property
F and the same not being a suit for sale instituted in enforcement
of the mortgage in question clearly comes under the pale of the
bar under Order XXXIV Rule 14 CPC. He further submitted that
their purchase in the circumstances amounts to a mere trust
and they cannot be allowed to exploit the adversity of the
G appellants. He further pointed out that the property in question
is worth of Rs. 100 lacs and for non-payment of rent of just less
than Rs.1,200/-, the sale took place and was purchased by the
mortgagee. Finally according to him, even on equity, the
appellants are not entitled to any relief.
H 5) Before adverting to necessary provisions, it is useful to
M.R. SATWAJI RAO (D) BY L.RS. v. B. SHAMA RAO 95
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J.]
~
refer certain factual details. It is seen that the deceased second A
defendant had taken the suit property under possessary
mortgage dated 19.02.1948 on payment of Rs.10,000/- for a
.~ period of five years from the plaintiffs. However, the plaintiffs/
mortgagors continued in possession as tenants on monthly rent
of Rs.97.50. As the plaintiffs/ mortgagors failed to pay rents , B
O.S. No.120/51-52 was filed for recovery of Rs.1,225/~ towards
arrears of rent. The suit was decreed and the propertywas put
in auction in execution No. 1002/51-52 and the · mortgagee/
second defendant purchased the schedule property in court
auction on 11.09.1952. The sale was confirmed under Order c
XXI Rule.92 CPC. The second defendant became the absolute
owner of the schedule property. It is the claim of the mortgagee
that the sale held on 11.09.1952 was the sale of the right of
plaintiffs in the mortgaged property in question which came to
be purchased by him/second defendant, the said sale having
D
become final, there was no right of redemption subsisting on
the date of confirmation of sale as mortgage came to an end . In
this way, it was contended that the suit which was filed for
redemption of the schedule property is mis-conceived and not
maintainable in law. It was also claimed that the property once
mortgaged was sold in court auction and consequently the E
property never subsists as a mortgaged property. It was also
argued that the auction sale is not void, but voi~fable unless the ·
mortgagor avoids such a sale by taking recourse to legal
proceedings_ in the absence of which he will not be entitled to
exercise his right of redemption as there is no such right exist. It F
was also pointed out that though it was open to the plaintiffs to
take such steps as was necessary to prevent the sale being
held or to institute such proceeding as was necessary to get
the sale set aside, the plaintiffs failed to avail the remedy
available to them in law within the time available under the G
Limitation Act and thus allowed the sale to become final.-
J,. Therefore, the plaintiffs waived their rights. Though the trial Court
dismissed the suit and rejected the claim of redemption of the
mortgaged property, the appellate Court/High Court on
·appreciation of oral and documentary evidence and on the basis H
96 SUPREME COURT REPORTS [2008] 6 S.C.R.
A of relevant provisions. namely, Civil Procedure Code, Transfer 'f
of Property Act and Indian Trusts Act granted preliminary decree
for redemption which is now challenged in this appeal.
6) Chapter IV of the Transfer of Property Act, 1882 refers
various kinds of mortgage of immoveable property. Section 58
B defines that mortgage is the transfer of an interest in specific
~
immoveable property for the purpose of securing the payment
of money advanced or to be advanced byway of loan, an existing
or future debt, or the performance of an engagement which may
give rise to a pecuniary liability. The transferor is called a
c mortgagor, the transferee a mortgagee; the principal money and
interest of which payment is secured for the time being are called
the mortgage-money, and the instrument by which the transfer
is effected is called a mortgage-deed. In the case on hand, it is
not in dispute the mortgage in question is a usufructuary mort-
D gage which is defined in sub-section (d) of Section 58 as under:
"(d) Usufructuary mortgage.- Where the mortgagor ~
delivers possession or expressly or by implication binds
himself to deliver possession of the mortgaged property
to the mortgagee, and authorizes him to retain such
E possession until payment of the mortgage-money, and to
receive the rents and profits accruing from the property or
any part of such rents and profits and to appropriate the
same in lieu of interest. or in payment of the mortgage-
money, or partly in lieu of interest or partly in payment of
F the mortgage-money, the transaction is called an ,,,
usufructuary mortgage and the mortgagee an usufructuary
mortgagee."
Section 60 refers to 'right of mortgagor to redeem' which
---
reads thus:
G
"Section 60 - Right of mortgagor to redeem.- At any
time after the principal money has become due, the
mortgagor has a right, on payment or tender. at a proper "'
time and place, of the mortgage-money, to require the
H mortgagee (a) to deliver to the mortgagor the mortgage-
M.R. SATWAJI RAO (D) BY L.RS. v. B. SHAMA RAO 97
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J]
ilt'
deed and all documents relating to the mortgaged property A
which are in the possession or power of the mortgagee,
(b) where the mortgagee is in possession of the mortgaged
property, to deliver possession thereof to the mortgagor,
, and (c) at the cost of the mortgagor either to re-transfer
the mortgaged property to him or to such third person as
he may direct, or to execute and (where the mortgage has
been effected by a registered instrument) to have
registered an acknowledgment in writing that any right in
B
derogation of his interest transferred to the mortgagee
has been extinguished :
c
Provided that the right conferred by this section has not
been extinguished by act of the parties or by decree of a
Court.
The right conferred by this section is called a right to
D
•
redeem and a suit to enforce it is called a suit for
redemption.
Nothing in this section shall be deemed to render invalid
any provision to the effect that, if the time fixed for payment
of the principal money has been allowed to pass or no
E
such time has been fixed, the mortgagee shall be entitled
to reasonable notice before payment or tender of such
money."
, Order XXXIV CPC speaks about suits relating to
mortgages of immoveable property. Among the other provisions,
we are concerned about Order XXXIV Rule 14 CPC which
reads as under:-
F
"14. Suit for sale necessary for bringing mortgaged
property to sale.- (1) Where a mortgagee has obtained
a decree for the payment of money in satisfaction of a G
claim arising under the mortgage, he shall not be entitled
•• to bring the mortgaged property to sale otherwise than by
instituting a suit for sale in enforcement of the mortgage,
and he may institute such suit notwithstanding anything
contained in Order 11, Rule 2." H
98 SUPREME COURT REPORTS [2008] 6 S.C.R.
.,.. \
A It is useful to refer Section 90 of the Indian Trusts Act,
1882 which reads as under:-
"Section 90 - Advantage gained by qualified owner.-
. Where a tenant for life, co-owner, mortgagee or other
qualified owner of any property, by availing himself of his
B position as such, gains an advantage in derogation of the
rights of the other persons interested in the property, or
where any such owner, as representing all persons
interested in such property, gains any advantage, he must ·
hold, for the benefit of all persons so interested, the
c advantage so gained, but subject to repayment by such
persons of their due share of the expenses properly
incurred, and to an indemnity by the same persons against
liabilities properly contracted, in gaining such advantage.
Illustrations
D
(a) A, the tenant for life of leasehold properly, renews the
lease in his own name and for his own benefit. A holds the
renewed lease for the benefit of all those interested in the
old lease.
E (b) A village belongs to a Hindu family. A, one of its
members, pays Nazrana to Government and thereby
procures his name to be entered as the inamdar of the
village. A holds the village for the benefit of himself and the
other members.
F
(c) A mortgages land to B, who enters into possession. B
allows the Government revenue to fall into arrear with a
view to the land being put up for sale and his becoming
himself the purchaser of it. The land is accordingly sold to
· B. Subject to the repayment of the amount due on the
G
mortgage and of his expenses property incurred as
mortgagee, B holds the land for the benefit of A.
A perusal of the various clauses in the mortgage deed
dated 19.02.1948, second mortgage dated 12.12.1948,
H pleadings in O.S. No. 120/51-52 filed for arrears c1f rent which
M.R. SATWAJI RAO (D) BY L.RS. v. B. SHAMA RAO 99
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J.]
~ was decreed on 19.05.1952, order passed in E.P.No. 1002/ A
51-52 dated 11.09.1952 as well as pleadings in O.S. No.632/
1983 on the file of third Additional. City Civil Judge, Bangalore
filed for redemption of mortgage and the reasoning of the High
Court in RFA No. 465/1990 dated 11.12.1998 which is
impugned in this appeal clearly support the stand taken by the B
.
+
contesting.respondents/plaintiffs. Though learned senior counsel
for the appellants contended that the claim and the decree in
O.S.No.120/51-52 has nothing to do with the mortgage dated
19.02.1948or12.12.1948, a perusal of all the details referred
to above leads to an irresistible conclusion that the decree in c
favour of the appellant mortgagee in O.S. No. 120/51-52 was
not an independent money decree against respondents but
merely for satisfaction of the rents accrued on the mortgaged
property, leased back to the respondents on 19.02.1948 itself
up to 12.12.1948 and thereafter which was secured by a second
D
mortgage deed dated 12.12.1948 executed by the respondents
-f in favour of the appellants. We have already referred to Rule 14
of Order XXXIV CPC which prohibits the mortgagee to bring
the mortgaged property to sell otherwise than by instituting a
., suit for sale in enforcement of the mortgage. Admittedly, the said
suit by the mortgagee was not in terms of Rule 14 of Order E
XXXIV. Therefore, bringing the mortgaged property for sale by
the appellants in execution of the decree passed in O.S. No.
120/51-52 and purchasing the same by the appellants in public
auction is clearly barred under Order XXXIV Rule 14 CPC. It is
F
/f·
. useful to point out that D.W.1 has specifically stated in her
examination that though the suit schedule property was
mortgaged by the respondents with the appellants by way of
possessory mortgage deed dated 19.02.1948, the respondents
never parted with the possession thereafter, as the appellants
chose simultaneously on 19.02.1948 to letthe respondents G
continue in possession as tenants on a monthly rental of
Rs.97.50. The High Court has also referred to the fact that on
Jr. 12.12.1948 a second mortgage deed for Rs.3,000/- was
'
executed in favour of the appellants by the respondents towards
arrears of rent for the period from 19.02.1948 to 12.12.1948. In H
100 SUPREME COURT REPORTS [2008] 6 S.C.R.
A those circumstances, we agree with the conclusion of the High
Court that in O.S. No. 120/51-52 brought by the appellant was
very much for seeking satisfaction of claims arising under the
suit schedule property and the same not being on a suit for sale
instituted in enforcement of the mortgage in question, the same
B is barred under Order XXXIV Rule 14 CPC. Further, we are
satisfied that all the relevant materials have been specifically +'
pleaded in the plaint in O.S. No. 632 of 1983 on the file of third
Additional City Civil Judge, Bangalore.
7) We have already referred to Section 90 of the Indian
c Trusts Act. Illustration (c) of Section 90 is applicable to the case
on hand. The purchase by the mortgagee in the circumstances
narrated above amounts to a mere trust and either himself or
his legal representatives cannot be allowed to exploit the
adversity of the appellants.
D
8) In view of the factual scenario, though learned senior
counsel for the appellants relied on decisions of various High }
Courts, we are of the view that there is no need to refer the
same.
E 9) In Mritunjoy Pani and Another vs. Narmanda Bala
Sasmal and Another, [1962] 1 SCR 290, the legal position as
to right of redemption in a usufructuary mortgage and Section
90 of the Indian Trusts Act have been clearly explained. The
following discussion and conclusion are relevant:
F "The following three conditions shall be satisfied before s.
90 of the Indian Trusts Act can be applied to a case : (1)
the mortgagee shall avail himself of his position as
mortgagee; (2) he shall gain an advantage; and (3) the
gaining should be in derogation of the right of the other
G persons interested in the property. The section, read with
illustration (c), clearly lays down that where an obligation
is cast on the mortgagee and in breach of the said
r
obligation he purchases the property for himself, he stands
1n a fiduciary relationship in respect of the property so
"'
H purchased for the benefit of the owner of the property. This
M.R. SATWAJI RAO (D) BY L.RS. v. B. SHAMA RAO 101
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J.]
is only another illustration of the well settled principle that A
a trustee ought not to be permitted to make a profit out of
the trust. The same principle is comprised in the latin
maxim commodum ex injuria sua nemo habere debet,
that is, convenience cannot accrue to a party from his own
wrong. To put it in other words, no one can be allowed to B
....... benefit from his own wrongful act. This Court had occasion
to deal with a similar problem in Sidhakamal Nayan v.
Bira Naik A.l.R. 1954 S.C. 336. There, as here, a
mortgagee in possession of a tenant's interest purchased
the said interest in execution of a decree for arrears of C.
rent obtained by the landlord. It was contended there, as
it is contended here, that the defendant, being a mortgagee
in possession, was bound to pay the rent and so cannot
take advantage of his own default and deprive the
mortgagors of their interest. Bose, J., speaking for the
D
Court, observed at p. 337 thus:
f
"The position, in our opinion, is very clear and in the
absence of any special statutory provision to the
contrary is governed by s. 90, Trusts Act. The
defendant is a mortgagee and, apart from special E
statutes, the only way in which a mortgage can be
terminated as between the parties to it is by the act
of the parties themselves, by merger or by an order
of the Court. The maxim "once a mortgage always a
,, mortgage" applies. Therefore, when the defendant
entered upon possession he was there as a
F
mortgagee and being a mortgagee the· plaintiffs have
a right to redeem unless there is either a contract
between the parties or a merger or a special statute
to debar them."
G
These observations must have been made on the
assumption that it was the duty of the mortgagee to pay
the rent and that he made a default in doing so and brought
about the auction sale of the holding which ended in the
purchase by him. The reference to s. 90 of the Indian H
· 102 SUPREME COURT REPORTS [20d8] 6 S.C.R.
A Trusts Act supports this assumption.
Xxxx )()()( xxxx
The legal position may be stated thus: (1) The governing
principle is "once a mortgage always a mortgage" till the
B mortgage is terminated by the act of the parties themselves,
by merger or by order of the court. (2) Where a mortgagee
purchases the equity of redemption in execution of his
mortgage decree with the leave of court or in execution of
a mortgage or money decree obtained by a third party,
c the equity of redemption may be extinguished; and, in that
event, the mortgagor cannot sue for redemption without
getting the sale set aside. (3) Where a mortgagee
purchases the mortgaged property by reason of a default
committed by him the mortgage is not extinguished and
the relationship' of mortgagor and mortgagee continues to
D
subsist even thereafter, for his purchase of the equity of
redemption is only in trust for the mortgagor.
Xxxx xxxx xxx
......... The said findings clearly attract the provisions of
E s. 90 of the Indian Trusts Act. In view of the aforesaid
principles, the right to redeem the mortgage is not
extinguished and in the eye of law the purchase in the rent
sale must be deemed to have been made in trust for the
mortgagor. In the premises, the High Court was right in
F holding that the suit for redemption was maintainable." r-
10) In Jayasingh Dnyanu Mhoprekar and Another vs.
Krishna Babaji Patil and Another, (1985) 4 SCC 162, again
considering similar claim with reference to Section 83 of the
G Transfer of Property Act.and Section 90 of the Indian Trusts Act,
this Court held:
"6. The only question which arises for decision in this
case is whether by reason of the grant made in favour of
the defendants the right to redeem the mortgage can be
H treated as having become extinguished. It is well settled
. M.R. SATWAJI RAO (D) BY L.RS. v. B. SHAMA RAO 103
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J.]
that the right of redemption under a mortgage deed can A
come to an end only in a manner known to law. Such
extinguishment of right can take place by a contract
between the parties, by a merger or by a statutory provision
which debars the mortgagor from redeeming the
mortgage. A mortgagee who has entered into possession B
of the mortgaged property under a mortgage will have to
give up possession of the property when the suit for
redemption is filed unless he is able to show that the right
of redemption has come to an end or that the suit is liable
to be dismissed on some other valid ground. This flows c
from the legal principle which is applicable to all mortgages,
namely "Once a mortgage, always a mortgage" .....
9. An analysis of Section 90 of the Indian Trusts Act, 1882
set out above shows that if a mortgagee by availing himself
of his position as a mortgagee gains an advantage whfoh D
would be in derogation of the right of a mortgagor, he has
·to hold the advantage so derived. by him for the benefit of
the mortgagor. We are of the view that all the conditions
mentioned in Section 90 of the Indian Trusts Act, 1882 are
satisfied in this case. The mortgagees i.e. Dnyanu, the E
father of Defendant 1 and Ananda the second defendant
could each get one-fourth share in the total extent of land
measuring 22 Acres and 13 Gunthas only by availing
themselves of their position as mortgagees. The grant
made in their favour is an advantage traceable to the F
possession of the land which they obtained under the
mortgage and that the said grant is certainly in derogation
of the right of the mortgagors who were the permanent
Mirashi tenants entitled to the grant under the Government
Orders referred to above. The defendants could not have G
asserted their right to the grant of the land when the plaintiffs
had deposited the requisite occupancy price well in time.
It is seen that the mortgagees obtained the grant in their
favour by making an incorrect representation to the
Government that they were permanent Mirashi tenants
H
1
04 SUPREME COURT REPORTS [2008] 6 S.C.R.
A although they were only mortgagees. Section 90 of the
Indian Trusts Act, 1882 clearly casts an obligation on a
mortgagee to hold the rights acquired by him in the
mortgaged property for the benefit of the mortgagor in
such circumstances as the mortgagee is virtually in a
B fiduciary position in respect of the rights so acquired and
he cannot be allowed to make a profit out of the
transaction ..... "
11) In Namdev Shripati Nale vs. Bapu Ganapati Jagtap
and Another, (1997) 5 SCC 185 in a similar situation this Court
C held thus:
"6 ....... We are of the view that in the totality of the facts
and circumstances, the provisions of Section 90 of the
Indian Trusts Act are attracted. The first respondent-
mortgagee gained an advantage by availing himself of
D
his position as a possessory mortgagee and obtained
the regrant. This he did by committing a wrong. He
committed a default in not paying the occupancy price
within the time limited by law for and on behalf of the
mortgagor. The regrant was obtained in his name by
E posing himself as a tenant, which was possible only
because he was in possession of the land (as a
possessory mortgagee). The advantage so gained by him
in d£~rogation of the right of the mortgagor should attract
the penal consequences of Section 90 of the Indian Trusts
Act. We hold that the default committed by a possessory
i
mortgagee, in the performance of a statutory obligation or
a contractual obligation, which entails a sale or forfeiture
of right in the property to the mortgagor, will attract the
provisions of Section 90 of the Indian Trusts Act. In such
G cases any benefit obtained by the qualified owner, the
mortgagee, will enure to or for the benefit of the mortgagor.
The right to redeem will subsist notwithstanding any sale
or forfeiture of the right of the mortgagor. We are of the
view that the law on this point has been laid down with
H admirable clarity by this Court in Mritunjoy Pani v.
M.R. SATWAJI RAO (D) BY L.RS. v. B. SHAMA RAO 105
(DEAD) BY L.RS. & ORS. [P. SATHASIVAM, J.)
Narmanda Bala Sasma/ (1962) 1 SCR 290 and by K.K. A
Mathew, J. (as his Lordship then was) in Nabia Yathu
Ummal v. Mohd. Mytheen. [1963 KLJ 1177]. The said
decisions have our respectful concurrence.
12) Though Mr. Sanyal, learned senior counsel heavily
relied on a decision of three-Judge Bench in Sachidanand B
_,;.
Prasad vs. Babu Sheo Prasad Singh, [1966] 1 SCR 158, on
going through the factual scenario, we are saUsfied that the
same is not helpful to the stand taken by the appellants.
13) Though the mortgagee purchased the mortgaged c
property pursuant to the decree in O.S. No. 120/51-52, as
explained and interpreted the provisions of Order XXXIV Rule
14 CPC and Section 90 of the Indian Trusts Act, in the absence
of recourse to Rule 14 of Order XXXIV, we hold that the
relationship of mortgagor and mortgagee continues to subsist
D
even thereafter, and his purchase is only in trust for the mortgagor.
In view of the same, the right to redeem the mortgage is not
extinguished and in the eye of law the purchase of the mortgaged
property in pursuance of the decree for rent arrears must be
deemed to have been made in trust for the mortgagor. In such
circumstances, the High Court was right in granting preliminary E
decree for redemption. Insofar as the period of limitation is
concerned, article 61 of the Limitation_ Act, 1963 applies and
for a mortgagor to redeem or recover possession of immoveable ·
property mortgaged; the period of limitation provided is 30 years
_., when the right to redeem or to recover possession accrues. In F
view of the same, since the mortgagee purchased the
mortgaged property in court auction on 11.09.1952 and the suit
for redemption of mortgaged property was filed within the time
prescribed, the High Court cannot be faulted for granting
preliminary decree for redemption. G
14) In view of the above discussion and conclusion, the
appeal fails and the same is dismissed with no order as to costs.
K.K.T. Appeal dismissed.
H
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